U.S. firms in China steel for short-term pain to win long term

An annual survey released by the American Chamber of Commerce in Shanghai on Thursday found that over 80 percent of the 406 companies that responded said they planned to increase investment this year, albeit at a slower pace than beforeReuters | January 21, 2016, 18:00 IST

SHANGHAI: U.S. firms in China see near-term risks from rising costs, slowing growth and stronger local rivals, though most are still upping investment and remain hopeful over longer-term prospects in the world's second-largest economy.

An annual survey released by the American Chamber of Commerce in Shanghai on Thursday found that over 80 percent of the 406 companies that responded said they planned to increase investment this year, albeit at a slower pace than before.

Global business leaders, central bankers and investors have their eyes glued on China for signs of where its economy is headed after posting in 2015 its weakest annual growth in a quarter of a century.

"The moderation of the economy is part of the landscape. We continue to believe very strongly that over the mid- to long-term China still represents tremendous growth potential," Matt Tsien, the China head of General Motors Co said at a separate event on Thursday to open a Cadillac plant in Shanghai.

GM, the biggest automaker in China by sales last year, is sticking to its plans to add more capacity in the world's largest auto market and has not made any special adjustments to its workforce, Tsien added.

"We believe that by localising and bringing products that are right for this market at the right price point, we're going to able to gain market share over the years."

Another survey by a separate, Beijing-based U.S. chamber on Wednesday said it expected China's growth this year to reach 6.25 percent or less.

The Shanghai chamber's report showed revenue growth in 2015 of its members hit its lowest level since the financial crisis in 2009, with 61 percent of firms saying revenue grew last year, down from 75 percent in 2014.

"Most manufacturing sectors are experiencing margin squeeze, that is just the truth," said Cecilia Ho, the chamber's vice president who is also the Asia President of U.S. paper firm International Paper Co, adding that these sectors were also facing serious issues of overcapacity.

Over 70 percent also said volatility of China's currency, the renminbi, was a risk over the "short-term".